Dubai: The property market in Dubai and its tenants will be looking for some relief from higher rental demands as and when more landlords place their units back for yearly rentals from short-stay lettings.
There have already been instances of landlords making the switch, particular at the Downtown and in Dubai Marina after peak demand for short-stay leases seen in November and December receded.
“Landlords are seeing the 20-40 per cent increase in yearly rentals at Dubai’s most in-demand locations,” said an owner of a property management firm. “These rent gain trends continue into 2023, and some of these landlords do not want to miss out, and they are the ones switching back to annual rentals.
“Because when they do, they will be getting a rental request almost immediately.”
A lot of quality listings are coming off of Dubai's short-term rental market as the events season is coming to an end. Some owners are now looking for stability for rental
Industry sources say it will require many units becoming available for annual leases for the ongoing rent increases to subside. Latest two-bedroom lease renewals at Downtown Dubai have taken place at Dh120,000 plus, while for brand new contracts, the rents are coming in at much higher levels, according to the portal DXBInteract.com.
At Dubai Marina, a two-bedroom (1,119 square feet) rental just got signed for Dh125,000. Some industry sources believe these two locations could see the most switches - from short-stay rentals to annual - if current trends continue. On the Palm too, some landlords might be thinking along the same lines, with annual leases at select villas listing for well over Dh1 million. And with no shortage of those wanting to rent.
Dubai welcomed over 14 million tourists last year, nearly double that in 2021. Freehold real estate owners have increasingly sought to position apartments that would have otherwise rented as long-term units as commercial and hospitality-grade STRs to cater to the surge in travel
Short vs. long
Other landlords are caught in a dilemma as to whether opting to move out from short-stay rentals will actually get them higher returns in the Dubai market right now. Joanna Plunkett is the Short Term Rentals Manager at BetterStay, and she reckons that “Short-term rental isn't always just about the rental amounts. We have landlords getting the same rental income with their short-term property as they would on a long-term lease but want the flexibility of asking a tenant to leave without the time and expense of serving a legal notice.
“As we know, in the long term, a landlord can only take back possession of this property if he is selling, using it for himself or doing major renovations. Even in those cases, they can wait up to a year to get it back.
“We are not seeing landlords pull out from short stays.”
Since December, the rental rates for short stays in Dubai have stayed the same and, in some cases, increased slightly as it is the time of year when there is more demand
It is a landlords' market after all
Such is the situation in the Dubai residential rental market that landlords have all the time to decide what course suits them best. The resident base in the city continues to increase, and with that there has been no dip in the demand for letting space.
If opting for short-stay rentals, landlords get one distinct advantage – when they want to sell and with minimum fuss in their dealings with the tenant.
"A long-term lease is an excellent commercial arrangement - however, it is one that locks in both parties for a minimum of a year, if not longer," said Aahan Bhojani, founder and CEO of Silkhaus, a newly launched portal specialising in short lets.
"This can often encumber the ability to sell an asset.
"What is clear is the need for flexibility in tenant-landlord agreements. We have seen many landlords opting for short-term rentals as a means of generating above-market net yields with flexibility in buying and/or selling properties. In an ever-changing market environment, the need for flexibility is paramount - on the part of asset owners, and on part of end-users."
Trends in the Dubai rental market during April and thereafter will probably decide it for landlords as to what they should be doing next - staying put in short stays or go all out for a one-year contract.